Kirkland's Inc. (NASDAQ:KIRK) Q3 2019 Earnings Conference Call - Preliminary Transcript

Dec 05, 2019 • 09:00 am ET

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Kirkland's Inc. (NASDAQ:KIRK) Q3 2019 Earnings Conference Call - Preliminary Transcript

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Presentation
Operator
Operator

Good morning and welcome to Kirkland's Third Quarter 2019 Conference Call. (Operator Instructions) Please also note today's event is being recorded. At this time I'd like to turn the conference call over to Jeff Black, SCR Partners. Please go ahead.

Executive
Jeff Black

Thank you. Good morning and welcome to Kirkland's conference call to review results for the third quarter of fiscal 2019. On the call this morning are Woody Woodward, Chief Executive Officer; Mike Cairnes, President and Chief Operating Officer; and Nicole Strain, Chief Financial Officer.

The results as well as the notice of the accessibility of this conference call on a listen-only basis over the Internet were announced earlier this morning in a press release that has been covered by the financial media. Except for historical information discussed during this conference call, the statements made by the company management are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve known and unknown risks and uncertainties which may cause Kirkland's actual results in future periods to differ materially from forecasted results. Those risks and uncertainties are more fully described in Kirkland's filings with the SEC including the company's annual report on Form 10-K filed on March 29, 2019.

With that I will turn it over to Woody.

Executive
Woody Woodward

Thanks Jeff. Good morning and thank you for joining us today. The third quarter remained challenging. We made progress on key merchandising initiatives and will continue to add new categories to Kirkland's to broaden our reach. E-commerce trends reaccelerated in the quarter and we're driving more of a total business BOPIS which supports our focus on running a true omni-channel platform.

Looking at some specifics for the quarter, we had success in our seasonal products of Harvest

Halloween and early Christmas merchandise. Our new categories are starting off well. Collections of dinnerware, flatware, drinkware, households, dining furniture and tabletop textiles are emerging as the clear winners. New additions of rugs and bedding remain promising and we're excited about their potential as we increase category awareness. We experienced mixed results in core categories. Furniture and textiles performed well though the mix shift to furniture is impacting margin rate.

We're pleased with the acceleration in our e-commerce revenue. Our BOPIS sales accounted for a growing share of e-commerce sales in the channel and we're encouraged about its potential to improve traffic and profitability. Brick-and-mortar traffic remained weak. Our marketing spend did not drive the returns we were looking for in Q3 which resulted in additional merchandise promotions that negatively impacted the margin rate.

At the same time, new categories and growth and e-commerce were not enough to offset negative store comps which deleveraged operating expenses. We've adjusted our outlook to reflect these trends and Nicole and Mike will discuss those later. We are working aggressively to address infrastructure and operating costs. As we look to the fourth quarter, our focus is on helping customers find ways to bring happiness home. We have a more purposeful depth